Sugar Market Report for 5 July

Good morning,

US markets were closed yesterday for their Independence holiday so it was quiet in London. On Friday NY collapsed over 40 points as global recession fears gripped the markets including sugar. The market had opened a couple of points lower but immediately dropped lower on negative macro picture. There was a reasonable correction early afternoon which saw prices push into the plus column but prices soon started to slid in line with virtually all other commodities. Fund selling took prices down to their lowest level since the 1st March. While some good support appeared in front of 18 cents it was a poor close. The VH ended at -29 while the HK was at +50. London also slipped but the drop was less severe as the WP strengthen with the VV WP ending at 124.00 and the VZ WP at 105.00. Yesterday, somewhat unsurprisingly, London improved in early trading quickly gaining over $3 before becoming becalmed. Another bout of buying during the afternoon saw prices improve further although some late speculative long liquidation trimmed the gains.

The COT released on Friday was probably a surprise to most. The specs/funds cut their net long position by a massive 46,621 to 12,955 during a period when the market dropped 65 points. The non-commercials cut their net longs by 39,072 to just 1,606. While the gross longs did cut positions (-12,718) it was the increase in the gross short (+26,354) which will have caught the eye. Given prices dropped again on Friday it is almost certain that the funds are now net short which will be the first time since early June 2020. The commercials saw a big decrease in the net short position as the cut by 57,673 to 245,226 as end-users took advantage of the weak prices to price. The Index funds also cut their net longs by 11,053 to 232,271.

This morning the market opened 13 points firmer but soon slipped lower. Currently prices are holding at 10 points firmer. The VH is unchanged at -29 while the HK is 1 points better at +51. In early London trading the QV is firmer at +20.00 while the VZ is unchanged at +20.00. The macro is mixed with crude higher while grains/soya are distinctly lower. The USD Index is firmer and getting back to the highs seen last month which is also weighing on USD commodities. It is also weighing on the BRL which ended at 5.33 yesterday. The combination of lower fuel taxes, increasing ethanol stocks and a weakening BRL in Brazil is suggesting the sugar/ethanol split will continue to increase in favour of sugar over the next few weeks at least. Add the concerns over a global recession developing and it is not too surprising prices took a dive on Friday. However, good support seen at 18 cents may hold. While the funds are now likely to be net short it is probably unlikely they will build a large short position. Nevertheless, it would also seem unlikely that prices will see any significant rally unless the macro make a big recovery or a weather issue emerges.

 

Contact the ADMISI Sugar Desk team:

Phone: +44(0) 20 7716 8598

Email: admisi.sugar@admisi.com

Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.

ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.                  

 A subsidiary of Archer Daniels Midland Company.

 © 2022 ADM Investor Services International Limited.

Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.

ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.                  

A subsidiary of Archer Daniels Midland Company.

© 2021 ADM Investor Services International Limited.

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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